Logo of Phnom Penh Post newspaper Phnom Penh Post - NBC halts interest payouts on reserves of Kingdom’s banks

NBC halts interest payouts on reserves of Kingdom’s banks

Content image - Phnom Penh Post
The head office of the National Bank of Cambodia in Phnom Penh. Vireak Mai

NBC halts interest payouts on reserves of Kingdom’s banks

The National Bank of Cambodia has announced that it will stop offering interest payments to banks in the Kingdom for their currency reserves. Banking sector leaders say the move will not alter current business models.

While the decision to cut off interest payments from the central bank to commercial firms could see revenues fall, many in the industry say the interest they earn is just a small fraction of profits.

A message on September 4 from NBC governor Chea Chanto said the central bank’s committee for monetary policy decided to end the interest payments.

However, the announcement did not provide details on how the decision came about or what the interest rate had been.

‘Look after customers’

Currently, reserve requirements for lenders stand at 12.5 and eight per cent for foreign and domestic currencies, respectively.

The NBC previously paid out an interest of 4.5 per cent of the total reserves for foreign currency. No interest was paid for reserves in riel.

President and group managing director of Acleda Bank, In Channy, said the decision wouldn’t impact the bank’s operation because revenue from the interest is very small.

“The interest rate revenue on the reserve requirement was very small, so there will be no impact on the bank’s operations,” he said, adding that all the institution’s consumer-facing rates will stay the same.

“[The move] could make some banks consider lower interest rates on deposits, but I don’t think anyone will do this because there are more banks and more competition, so everyone needs to look after their customers.”

Cambodia Microfinance Association (CMA) chairman Kea Borann said on Sunday that the NBC’s decision to end interest payments on reserves will not substantially change the banking industry’s income.

“I think it will encourage banks to look at sources of funding within Cambodia. Therefore, banks may try harder to mobilise deposits and possibly issue corporate bonds,” he said.

MOST VIEWED

  • Would you like fries with that? US burger chain makes Phnom Penh debut

    California-based The Habit Burger Grill restaurant chain is all set to serve up a delicious array of charbroiled burgers and sides at its newest international location in the centre of Phnom Penh. The Habit is “renowned for its award-winning Charburgers grilled over an open flame,

  • Phnom Penh underpass opens to ease traffic

    Prime Minister Hun Sen has announced a temporary opening of the 488m underpass at the Chaom Chao roundabout in Phnom Penh’s Por Sen Chey district, which was recently completed to connect traffic from National Road 4 to Russian Federation Blvd. The move is to reduce

  • Banteay Meanchey flood victims receive aid

    Prime Minister Hun Sen on Wednesday provided aid to more than 10,000 families affected by flooding in Banteay Meanchey province’s Mongkol Borei district and offered his condolences to the 18 victims who drowned in the province over the past week. He said flooding had occured in

  • PM urges caution as Polish man tests positive for Covid

    The Ministry of Health on Wednesday reported that a 47-year-old Polish man tested positive for Covid-19 after arriving in Cambodia on Monday. There are a total of six Covid-19 patients currently in the country, all of whom are being treated at the Khmer-Soviet Friendship Hospital

  • Show evidence of Chinese military base, critics told

    Prime Minister Hun Sen on Monday said he had had enough of certain countries and opposition groups claiming Cambodia had allowed China to base its military in Cambodia and dared critics to show clear evidence. Hun Sen made the remarks while presiding over a groudbreaking

  • Serving coffee with a side of robots

    The eye-catching glass building surrounded by greenery at the intersection of Streets 371 and 2002 in Phnom Penh’s Sen Sok district is more than just another coffee shop where you can while away a few hours. UrHobby House cafe is filled with robots and characters from